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Module 2: Multiples Analysis. Brian Phelan. Agenda. Multiples background Balance sheet m ultiples Income s tatement multiples HP recommendation Multiples concerns. Multiples Background. First pass analysis Create summary metrics Value = summar y performance measure x market multiple
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Module 2: Multiples Analysis Brian Phelan
Agenda • Multiples background • Balance sheet multiples • Income statement multiples • HP recommendation • Multiples concerns
Multiples Background • First pass analysis • Create summary metrics • Value = summary performance measure x market multiple • 5 steps
5 Steps • Select summary performance measure • Select comparable companies • Compute market multiple for comparables • Compute target company’s value • Subtract value owed to debt holders and divide by shares outstanding
Balance Sheet Multiples • NEA multiple • Book value equity multiple
Income Statement Multiples • EPAT multiple • EPAT from sales • Net income • Comprehensive income • Sales multiple • (P-BV)/RD multiple
Multiples Concerns • How comparable are the companies • The range in multiples for comparables • Be aware of assumptions being made